Sydney: Asian stocks fell on Monday as a sharp drop in US consumer sentiment added to worries that its economic recovery is losing momentum, with the cautious tone also pulling the euro from two-month highs.
The MSCI index for Asian stocks outside Japan dropped 1%, its worse daily performance this month, as investors sold riskier assets. Australian stocks fared the worst in the region, shedding 1.6%.
The Japanese market was shut on Monday for a holiday.
“The key issue driving the market at the moment is slower global growth,” said George Clapham, head of equities at Arnhem Investment Management in Australia.
Investors who believed the world economy is on shaky ground got more ammunition for their arguments on Friday after US data showed consumer prices fell for the third straight month in June while consumer sentiment dropped to a near one-year low.
Major US stock indexes slumped as much as 3.1% with the gloom spilling over into Asia on Monday.
Sub-indices for the MSCI Asia ex-Japan share index showed materials stocks led losses in the region as the weak US data weighed on oil and metals prices. The materials index was down 1.2%.
All said, there were a couple of bright spots among Asian markets, helped mainly by corporate takeover activity.
Australia’s Healthscope leapt 11% to near three-year highs after the firm recommended a $1.7 billion takeover bid from two private equity firms.
Singapore healthcare firm Parkway, the target of a bidding war, was up 0.3%, aided by talk that it may get a sweetened offer from one of its two corporate suitors. Yet, there was no missing the lacklustre tone in the broader market. Oil prices dipped 0.3% to $75.77, while safe-haven gold eased to $1,192.80 an ounce after falling to its lowest in more than a week in the previous session.
The euro, which had staged a smart comeback in recent weeks helped largely by a short squeeze, also lost steam on Monday as cautious investors took profits on its recent gains.
The euro traded at $1.2893, down from Friday’s $1.2933. But some traders warned it may be too early to believe the euro is on a strong rebound having survived the worse of Europe’s debt crisis.
Markets are anxiously awaiting the results of stress tests on European banks due out on Friday.
Monday’s drop in the euro benefitted the US dollar, despite concerns about the health of the US economy. The US dollar index against a basket of other major currencies was up 0.2% at 82.643.
With the market anxious to know whether the world’s biggest economy is stalling, semiannual testimony by US central bank chief Ben Bernanke on Wednesday will also be closely watched by investors.